Additional Reasons for Supporting this “Call”
The text of the Call for Renaissance of the Bank of Canada stresses extraordinary prospects for using the Bank of Canada, as was done in our past, for coping with existing government debts while providing abundant funding to meet public needs. But there are additional compelling reasons for reviving these long neglected powers of the Bank of Canada. With our Bank of Canada creating money for public benefit as called for here, we could begin to reverse the entire range of damaging problems which are fundamentally rooted in our presently prevailing destructive money system, and which imperil our future. The changes we seek could not only provide funding to meet public needs, but could also contribute powerfully to ameliorating in other ways the very problems that our civil society organizations are working so diligently to overcome. As we bring to awareness the full range of damaging dynamics operating in our money system, we are enabled to recognize all the more clearly how urgently change is needed.
To begin with, it is essential to recognize that nearly all the money presently in circulation in Canada (and throughout the capitalist world), about 97%, the money all of us must use in order to carry out daily economic transactions, has not been supplied by governments, as is widely believed, but has come into being as loans made by private banks. Without private-bank lending we would have hardly any money at all, and our economy would be virtually paralyzed. And where do the banks get the money they lend? They create it out of nothing! When borrowers are granted loans, the banks create brand new money simply by making computer entries in the accounts of the borrowers. But of course when the banks make loans, they require that we borrowers put up valuable collateral, and if we fail to pay back not only the principal of the loan but also the interest, they take over our collateral – as they are presently doing on a massive scale in the U.S., with little regard for the suffering they are causing. This is the kind of power the private banks have been granted. It involves a highly unjust concentration of power, amenable to prodigious abuses like those which brought on the 2008 financial meltdown in the U.S.
But this is not the worst of it. When our private banks create nearly all our money supply by lending it into existence, they create money for the principal of their loans, but do not create money for the interest that they require to be paid. This is the most fundamental and far reaching of the afflictions with which our present money system plagues every aspect of our society. Its impact is all the more devastatingly potent because it operates silently and invisibly, unobserved and unnoticed, beneath our awareness, and outside our consciousness. Borrowers – individuals, businesses, governments – urgently need money to pay interest on their loans. But money for interest has not been created. We have a debt-money system. Hardly any debt-free money – money free from the requirement that interest be paid – exists. Borrowers are thrown into competition with each other to obtain money which has been created only as principal to pay back both principal and interest, and also to have additional money for their own use. Moreover, those who owe little or nothing are dependent on this same money supply, which has been created as debt, and they, too, join the competition for use of this limited supply of money.
So where can additional money be obtained? One possibility is through the sort of economic growth which depletes the resources of our finite global ecological system. Thus our money system promotes environmental destruction by stimulating a drive toward unsustainable economic growth. Where else can additional money be obtained? Through further borrowing from the banks at further interest, further exacerbating the problem. Some people, especially the economically more vulnerable, those already in or verging on poverty, unavoidably default on their loans, enabling the banks to foreclose on their collateral. Thus our money system promotes ever-increasing disparities between the rich and poor, with manifold, well-known resulting ills. The business of private banking, with its incredible access to the power to create money out of nothing, attracts ambitious careerists who become increasingly ruthless and arrogant as they exploit relatively powerless people, as we have seen in the 2008 financial meltdown.
In our society with its debt-money system, some people may go to heroic extremes to promote and to express charitable impulses. But charity can never be enough to overcome the chronic scarcity within our economy caused by lack of money for interest payments. Indeed, charity cannot thrive in the context of inescapable competition for scarce money. A pervasive economic insecurity intensifies the competition. Our debt-money system fluctuates between inflation and recession. Businesses, in order to gain money for debt payments – interest plus principal – strive in any ways possible to push up prices, and facing increasing prices on top of their own debt payments, workers press for higher wages. Inflation pressures result. As borrowings grow in the quest for money to cover interest, defaults build up and the economy collapses. Only the banks continually prosper, collecting interest while the economy expands and taking over collateral when the collapse occurs. This system constantly undermines impulses toward kindliness and caring.
Recent pressures to pay off growing government debts, in Canada, the U.S., and beyond, appears sensible, but this process brings our society neither solvency nor prosperity. As tax receipts are used to pay off debt, the banks are enriched by the interest payments they receive, further concentrating wealth and power. But the money repaid as principal is destroyed, reducing the money supply, and bringing down the economy. Paying off debt is not a viable solution to the problems of a debt-money system. The only viable solution is to break away from this debt-money system.
For Canada, the direction we need to take is clear. We need to revive use of the creative powers of the Bank of Canada to provide abundant interest-free, debt-free money to meet public needs. This practice can create conditions enabling us to move toward ameliorating the entire range of social and environmental problems endangering our future. Reviving these powers of the Bank of Canada is not a panacea. Pressures inevitably will arise to use Bank of Canada-created money for destructive purposes. The public, largely through civil society organizations, needs to become well informed about monetary issues, and carefully monitor monetary policy to assure that the powers of the Bank of Canada are democratically controlled for public welfare. Working effectively on this issue is crucial to enable our invaluable civil society organizations to progress toward reaching their humane, caring, environmentally sensitive goals.